Duluth International Airport (DLH) - Airport Board Retreat | December 2021
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Duluth International Airport (DLH) Airport Board Retreat | December 2021
Presentation Overview
– Where we were in late 2019 (last Board Retreat)
– Master Plan Forecast
– Where we’re at now: Key Industry Trends
– Near-term
– Longer-term
– DLH Air Service
– Impact from COVID
– What 2023 & beyond looks like
– Review of recent carrier meetings & planned activity for 2022-23
DLH Board Retreat | 2
Where airline industry
was in late 2019
DLH Board Retreat | 3After shorter-term issues (below), network carriers were planning
on about 3%-4% annual capacity growth
Scheduled Seat Capacity Growth – United: After growing about 6% annually over
past 2 years, slowing this summer
3Q19 vs 3Q18
– Pilot shortages for 50-seat RJ flying (about 5,000
4.5% hours per month)
4.0% 2.3% more seats in total for these
4.0% airlines; 1.9% more flights – 737 Max issues
3.5%
3.1%
3.0% – 737 Max has had the biggest impact upon
Southwest & American
2.5%
2.0%
1.5% – For the first time in recent memory, DL was
1.5%
the fastest growing network carrier
1.0%
0.5%
0.1% – These 4 airlines: Almost 80% of industry
0.0% capacity
Delta United American Southwest
DLH Board Retreat | 4Most of industry growth was on ULCCs and this was expected
to continue in the future
Scheduled Seat Capacity Growth – ULCC: Ultra-low cost carrier
3Q19 vs 3Q18
60.0% 56.1% – Sun Country: Much smaller than other 3 ULCCs
50.0%
– Allegiant: Growing again after slowing in late
40.0% 2018 (MD-80 retirements)
30.0%
– Frontier and Spirit continue rapid growth
19.1% 19.6%
20.0%
10.0%
10.0%
0.0%
Frontier Allegiant Spirit Sun Country
DLH Board Retreat | 5Where were ULCCs growing? Mostly to destination
markets or to larger cities (flying to destination markets)
Top Growing Markets by ULCC: 3Q19 vs 3Q18 Scheduled Seats
Top Growing Allegiant Markets Top Growing Spirit Markets Top Growing Frontier Markets Top Growing Sun Country Markets
Seat Change Seat Change Seat Change Seat Change
Market Absolute % Market Absolute % Market Absolute % Market Absolute %
Ashville, NC 50,132 75.2% Orlando, FL 246,395 37.8% Denver, CO 279,916 23.8% Minneapolis, MN 113,532 37.4%
Orlando-Sanford, FL 48,001 13.3% Las Vegas, NV 214,354 30.5% Orlando, FL 190,446 39.2% Las Vegas, NV 48,459 127.3%
Sarasota, FL 45,219 406.8% Austin, TX 156,004 New Las Vegas, NV 147,944 43.5% Nashville, TN 34,404 New
Destin, FL 39,333 35.4% Atlanta, GA 109,704 29.3% Philadelphia, PA 91,096 35.0% Portland, OR 33,951 150.3%
Knoxville, TN 26,262 44.2% Fort Lauderdale, FL 106,601 9.6% Cleveland, OH 53,300 35.5% Providence, RI 24,705 New
Grand Rapids, MI 25,479 69.8% Raleigh-Durham, NC 102,369 New Tampa, FL 53,212 57.6% San Francisco, CA 22,833 80.9%
Nashville, FL 24,060 74.7% Baltimore, MD 90,508 21.4% San Francisco, CA 45,880 103.8% Los Angeles, CA 18,453 40.3%
Albany, NY 23,817 New Charlotte, NC 66,976 New Raleigh-Durham, NC 44,854 28.2% Newark, NJ 16,104 New
Fort Lauderdale, FL 22,935 19.3% New Orleans, LA 65,883 28.6% Boston, MA 43,812 New Chicago, IL 16,104 New
Savannah, GA 20,468 37.3% Philadelphia, PA 61,332 47.8% Fort Lauderdale, FL 39,392 New San Antonio, TX 16,002 New
Phoenix-Mesa, AZ 15,429 7.9% Denver, CO 58,257 29.5% Houston, TX 37,386 144.4% Philadephia, PA 15,555 New
DLH Board Retreat | 6Key Industry Trend: Declining connecting traffic
DL’s % Connecting Traffic: MSP
2012 - 2018 Connecting traffic is
typically lower yielding
70% 68.9%
68.1% 68.3% 68.5%
68% 67.3%
66%
64.5%
64%
62%
60.5%
60%
58%
56%
2012 2013 2014 2015 2016 2017 2018
DLH Board Retreat | 7Where DLH was in
late 2019
DLH Board Retreat | 8DLH seat capacity was up almost 37% in 2 years
DLH Departing Seats – UA Airbus on overnight trip generated
most of growth in 2018
22,000
20,145
20,000 – New AA service generates majority of
growth in 2019
18,000
16,000 15,712 – Although Delta aircraft upgrades in fall of
14,497 2019 were also contributing to growth
14,000
12,000
10,000
Oct 2017 Oct 2018 Oct 2019
DLH Board Retreat | 9DLH “leakage” had been improving dramatically and was
generating the majority of DLH traffic growth at the time
AIRPORT OF ORIGIN: 2019E
BOOKINGS W/I 30 MILES
DLH Retention: 2010 – 2019E
Bookings w/i 30 miles
2019E 47%
2018 39%
DLH 2016 35%
MSP 47%
53% 2014 41%
2012 42%
2010 41%
30% 35% 40% 45% 50%
DLH Board Retreat | 10Airline Share of Bookings from Catchment Area: Mostly
price sensitive traffic driving to MSP
AIRLINE SHARE OF DLH "LEAKAGE"
BOOKINGS W/I 30 MILES
• DL’s 38% share of DLH “leakage” is surprisingly low
• DL’s O&D share at MSP has historically been in
Other the 55%-60% range
American 3% • More recently at 50%
11%
• UA’s share is higher than expected
Delta
• May be due to some frequent flyer loyalty for
Sun 38% passengers “leaking”
Country
20% • The real surprise was Sun Country; may indicate
the potential for price-sensitive traffic, particularly
to more leisure-oriented destinations
United
28%
*YE 1Q19 DLH Board Retreat | 11Top Booked/”Leaked” O&D Markets: Potential new markets –
DEN, Florida/Sun Destinations
Top 25 DLH O&D Markets: YE 1Q19
Airport Reported Leaked TRUE
Rank City Name Code PDEW PDEW PDEW Fare • DEN: If DLH captured the majority of
1 Chicago ORD/MDW 41.6 7.0 48.7 $144 demand, would be similar to ORD
2 New York/Newark LGA/JFK/EWR 14.2 23.7 37.9 $232
3 Washington/Baltimore DCA/IAD/BWI 13.0 18.8 31.9 $235
4
5
Denver
Orlando
DEN
MCO
12.0
11.8
22.3
27.0
34.3
38.8
$188
$189
• Florida markets, LAS and PHX: Seasonally
6 LA Basin LAX/ONT/SNA/BUR 9.9 35.3 45.2 $263 much stronger demand
7 Phoenix PHX 8.6 63.1 71.7 $250
8 Las Vegas LAS 8.2 49.8 58.0 $239
9 Atlanta ATL 7.7 6.5 14.2 $275
10 Houston HOU/IAH 7.1 10.3 17.4 $293
11 Detroit DTW 6.8 2.6 9.4 $233
12 Boston BOS 6.8 23.5 30.3 $214
13 Dallas DFW/DAL 6.7 14.4 21.1 $219
14 Fort Myers RSW 6.4 13.9 20.3 $204
15 Seattle SEA 6.2 21.1 27.3 $245
16 Tampa TPA 6.0 12.2 18.2 $193
17 Portland PDX 5.3 18.5 23.8 $233
18 San Diego SAN 5.1 9.7 14.8 $241
19 San Francisco SFO 4.9 36.3 41.2 $264
20 Minneapolis MSP 4.8 0.0 4.8 $126
21 Philadelphia PHL 4.2 6.3 10.5 $249
22 Salt Lake City SLC 4.1 6.6 10.7 $324
23 St. Louis STL 3.9 12.9 16.8 $237
24 Nashville BNA 3.9 3.3 7.2 $211
25 Cleveland CLE 3.8 1.2 4.9 $269
DLH Board Retreat | 12Master Plan Forecast
Summary
DLH Board Retreat | 13Original Master Plan Passenger Service Forecast
• Passenger CAGRs: 3.4% (2023), 2.2% (2028) & 1.7% (2033)
• Before any alternative growth (to right)
DLH Board Retreat | 14Compared to U.S. activity, DLH General Aviation trends were
actually relatively strong
DLH Board Retreat | 15Resulting in moderate-to-stable growth forecasted going forward
DLH Board Retreat | 16Finally, Based Aircraft forecast exhibits similar growth as
compared to General Aviation operations
DLH Board Retreat | 17Key Industry Trends:
Near-Term
DLH Board Retreat | 18Key Travel Demand Trends: Recent & Near-term
– In general, travel demand followed/follows COVID and lockdowns
– Leisure travel bounced back much more quickly and has been relatively
strong
– Business travel demand continues to be particularly weak, although some
airlines expect this to be much stronger in 2022
– European bookings bounced back strongly once U.S. borders opened – were
above 2019 levels
– Asia, following lockdowns, continues to be extremely weak
DLH Board Retreat | 19Fastest growing markets: Sun & Mountain markets
DLH Board Retreat | 20Markets heavily dependent upon business traffic have been
really hurt: United cut 11 cities in November 2021…
DLH Board Retreat | 21… and AA cuts 27 routes (also in November)
DLH Board Retreat | 22A Major Issue: Pilot Shortage
– A recent issue exasperated by pilot furloughs/retirements during COVID
– The problem is at the regional airline level: Mainline/ULCCs are backfilling by
hiring regional airline pilots (and they can’t train fast enough)
– Only flying regional jets 6 hours/day (norm is 10-12 hours)
– Hope to be resolved in mid-to-late 2022
DLH Board Retreat | 232022: What are expectations*
– By middle/2nd half of 2022, domestic traffic returns to pre-pandemic levels
– European travel will be particularly strong in 2022 and probably exceed 2019
levels (note: highly dependent upon COVID trends/potential lockdowns)
– Travel demand to Asia will remain weak through most/all of 2022
– Business traffic returns to 80%-100% of 2019 levels by year-end 2022
– Leisure travel demand continues to be particularly strong
DLH Board Retreat | 24Key Industry Trends:
Longer-Term
DLH Board Retreat | 25ULCCs will be where the growth is
– ULCC growth: 15%+ CAGR over 5+ years
– Spirit: “Double size of airline over next 5 years”
– Frontier: 112 aircraft today, growing to a planned 271 in 2028
– Sun Country & Allegiant: Also planning 15%+ annual growth
– Network airline capacity growth will be marginally above economic growth
– GDP: 3% growth, capacity would grow about 4%
– Pilot shortage could be a mitigating factor for smaller cities/regional airlines
– While below ULCC growth, well above last decade
– Despite relative ULCC growth in the U.S. over past decade, ULCC share of
U.S. traffic is well below other regions of the world
DLH Board Retreat | 26Tied to ULCC growth, leisure travel will be where much of growth is
– Millennials: Experiences > Material things
– Demographics: Baby boom generation is retiring with $$$
– Within leisure travel segment, “new experiences” and new destinations have
been particularly strong the past few years – likely to continue
– Business travel will likely be impacted to some degree by Zoom/Teams
DLH Board Retreat | 27Aircraft will continue to be larger
– Better economics (economies of scale)
– Addresses potential pilot shortages
– Allows more capacity in real estate constrained airports (in major cities)
– Generally larger aircraft are more customer friendly
DLH Board Retreat | 28DLH Air Service:
Review of Recent
Trends & Going
Forward
DLH Board Retreat | 29DLH traffic got within 15% of 2019 levels this summer, with LFs
actually exceeding 2019 levels (impacted by pilot shortages)
DLH: Monthly Enplaned Passengers DLH: Monthly Load Factors
2019-2021 2019-2021
18,000 100
16,000 90
14,000 80
70
12,000
60
10,000
50
8,000
40
6,000
30
4,000 20
2,000 10
0 0
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
2019 2020 2021 2019 2020 2021
DLH Board Retreat | 30Throughout most of 2021, growing DLH traffic was equally split
between DL & UA, although that has changed in November…
Enplaned Passengers by Airline
Jan 2019 – August 2021
18,000
16,000
14,000 AA
Carrier LFs were in low-to-mid
12,000
80s this past summer
10,000
DL
8,000
6,000
4,000
UA
2,000
0
DLH Board Retreat | 31…while November is down, with SY entering market in December,
DLH seat capacity is within 15% of 2019 and well above 2018 levels
DLH Seats (in and out)
40,000
AA: Nov 2019
35,000 5,800 SY: Dec 2021
DL UA AA/SY – DL: Capacity share of 54% in 2018,
30,000
86% in November 2021
3,720
25,000 12,444 7,110 – December, January and February
12,956 3,150 look stronger, as UA adds back 1
20,000 8,900
frequency and SY starts service to
RSW and PHX
15,000 20,176 20,846
18,896
15,387 15,083
10,000
Nov 2017 Nov 2018 Nov 2019 Nov 2021 Dec 2021
DLH Board Retreat | 32Delta Air Lines
– Good chance that DL gets DLH capacity back to 2019 levels in summer of 2022
– Good chance of larger RJs and possibly mainline aircraft sprinkled in
– Over next couple of years DL will likely grow seat capacity moderately, with
larger aircraft driving most of increase
– Since late 2019, DL has been more committed to DLH and has generally
backed that up with larger, multiple cabin aircraft – expect this to continue
– Likely that service is exclusively over MSP; DTW or ATL service is a long-shot
DLH Board Retreat | 33United Airlines
– In near-term, UA has been the most impacted by pilot shortages; this likely
continues to be an issue through part of 2022
– By 2023, UA is likely in position to bring ORD capacity back to 2019 levels on
a year-round basis, possibly with some upgraded aircraft
– DEN: With SCASD/MRG, DEN service becomes a possibility again in 2023
– Somewhat dependent upon pilot shortage situation
DLH Board Retreat | 34Sun Country Airlines
– Starting PHX and RSW service in December 2021
– We will be targeting MCO service for winter 2022 season
– We will also be proposing CUN service for next winter/spring season
– With expected Sun Country growth, could eventually grow into additional
markets during summer
– Sun Country is a key target given their expected growth in the coming years
DLH Board Retreat | 35Other Airlines
– Frontier Airlines: Given planned growth and their DEN hub, a secondary choice
for DEN service (although a distant 2nd to what UA could provide)
– American Airlines: Back-up for ORD service
– Breeze Airways: Start-up airline who only recently begun flying; while they are
targeting larger markets, relatively smaller A220 aircraft is a decent fit
DLH Board Retreat | 36Recent & Next Steps
– Delta Air Lines: Fall presentation & meeting
– United Airlines: November Zoom presentation & meeting
– SkyWest Airlines: November meeting at SkyWest HDQ in St. George, UT
– Planned:
– Sun Country meeting at MSP HDQ in 1st Quarter of 2022
– JumpStart Air Service Conference in June 2022 with multiple U.S. airlines
– Delta Air Lines meeting in 3rd Quarter of 2022
– United Airlines HDQ meeting in 4th Quarters of 2022
– SkyWest HDQ meeting in 4th Quarter of 2022
DLH Board Retreat | 37THANK YOU!
DLH Board Retreat | 38You can also read
